The Taylor Rule Uses Three Variables to Determine the Target

question 136

Multiple Choice

The Taylor rule uses three variables to determine the target for the federal funds rate. Which of the following is NOT one of those variables?

• A) equilibrium real interest rate
• B) monetary base
• C) inflation rate
• D) output gap

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Definitions:

Statement of Cash Flows

A summary statement which tracks all cash inflows to a company from its regular business operations and funds received from investments, plus all cash outflows for paying business and investment costs within a certain period.

Investing Activities

Transactions involving the purchase or sale of long-term assets and investments which are not related to the entity's primary business operations.

Financing Activities

Activities that result in changes in the size and composition of the equity capital and borrowings of an entity.

Unamortized Discount

The portion of a bond issuance discount that has not yet been expensed to interest over the bond’s life.